You only needed to know one thing to make a lot of money investing last year: buy large-cap AI stocks. Nearly all have had hot returns. AMD and Nvidia have benefited most. Cloud service providers Amazon, Alphabet, and Microsoft have also grown. However, those performances are over. Which AI stock does Wall Street like most: AMD, Amazon, Alphabet, Microsoft, or Nvidia?
We can immediately eliminate two large AI stocks. AMD and Nvidia aren't expected to do well by Wall Street. Average analyst's 12-month AMD price target is down somewhat from current pricing. Since the stock has risen 130% in a year, that's hardly surprising. Many analysts believe AMD needs a break.
Similar story with Nvidia. Due to rising GPU demand, the stock has nearly tripled in a year. While demand doesn't appear to be diminishing, Wall Street believes Nvidia's shares have little further to run. The average price target is somewhat below the share price. Not all analysts dislike these two AI chipmakers. The most optimistic analysts expect AMD and Nvidia to rise 40% and 60% in the next year.
Wall Street likes Microsoft. The IT giant's average price target suggests a 10% upside. Microsoft shares could rise over 30% in the next year, according to one analyst.
Microsoft benefits in two ways from AI. The company's software uses OpenAI's GPT-4 big language model. This new feature may increase sales. Azure makes Microsoft the second-largest cloud services provider. Generative AI programs are being built and deployed in the cloud by companies.
Alphabet may beat Microsoft, AMD, and Nvidia in the short run, analysts say. The average 12-month stock price target is 15% higher than the present price. Alphabet stock might rise 30%, according to the most optimistic analyst.
Remember Alphabet's Google Gemini scandal, which misrepresented historical figures? Wall Street expects it to be a temporary speed bump. Google, like Microsoft, uses generative AI in numerous products. AI usage should benefit Google Cloud too.
Wall Street favors one large AI stock. Amazon's average 12-month price target has 17% upside. Analysts' biggest enthusiast of the company thinks the stock might rise 30%. AI drives company growth. AWS leads the cloud services industry and shares Microsoft Azure and Google Cloud's AI tailwind.
Analysts also notice Amazon's profitability and free cash flow improvements are paying off. E-commerce and cloud services giant's Q4 earnings rose to $10.6 billion from $0.3 billion. For the trailing 12 months, free cash flow rose to $36.8 billion from $11.6 billion in the year
Is Wall Street right that Amazon will outperform these five AI stocks in the coming year? Maybe. Amazon's momentum should continue. AMD, Amazon, Alphabet, Microsoft, and Nvidia will likely continue to triumph. We may look back 20 years and claim that investors needed to acquire large-cap AI stocks to generate money.
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